Digital Future of Insurance Emerges out of the Pandemic Fog
Digital Future of Insurance Emerges out of the Pandemic Fog
I regularly communicate with a very large and diverse cross-section of the broad insurance ecosystem and almost everyone expresses the same common professional anxieties and frustrations. With regard to the business of insurance, very few of these contacts have a clear view of the future, and for obvious and good reasons. However, I believe that several discernable patterns are emerging out of the fog of this pandemic and together they provide a fairly well-defined view of the future of insurance, leaving only the timing uncertain.
It’s a good bet that you are reading this article on digital media and that it was published in digital format. As overused and abused the word digital may be, it is only because it is so mission critical to every aspect of our industry. And although the migration from analog to digital was already well underway in 2019, the arrival of COVID-19 acted like gasoline on a fire and accelerated the trend. Data by its very nature demands to be digitized in order to be useful, and no industry has more data than insurance. Technologies such as mobility, connectivity, imaging and artificial intelligence in all of its manifestations are useless in an analog environment. Paper is the enemy of efficiency, information and cost management.
Claims is a Major Beneficiary of Digital
No single area of insurance has benefitted more than claims from the digital revolution. The “claim is the moment of truth” mantra is tiresome but still truer than ever. As insurance fell victim to commoditization and advertising budgets became bloated, insurers turned to claim service to differentiate and promote their brands. But true claims excellence is only attainable through end-to-end claims process digitization. From first notice of loss automatically transmitted by connected sensors and devices all the way to claim payments made instantly and digitally, and for every step in between, digital solutions are being adopted and integrated into digital claims platforms at breakneck speed.
Digitization and Innovation
If, as it often said, “data is the new oil” then digitization is the refinery, storage facility, pipeline and the distribution network. Innovation essentially means connecting the dots, particularly the ones that others have missed and those that were previously unconnectable. Digitization enables the connection of “dots” – individual bits of information from myriad sources all strung together in an electronic chain to arrive at a critical outcome. That could be an insurance quote, an estimate of repair costs, the identification of a likely fraud and thousands of others, all of which are required to make, build, operate and maintain an insurance enterprise and partner ecosystem. And digital, next-generation technologies enhance an insurers’ ability to easily build a partner ecosystem, embed insurance offerings and enable an innovation culture.
Digitization has enabled mobility and connected vehicle telematics which in turn has spawned new and exciting cross-industry partnership products and services linking auto makers, insurers, information and service providers as well as drivers. The resulting rewards and benefits include hyper-personalized auto insurance products, services and rates for drivers, deeper engagement with vehicle owners and greater certainty of safe and proper accident repairs for OEMs, faster and better claims service for insurers and safer roadways for all of us.
Similarly, digitization has enabled property insurers to develop and market new risk avoidance and claims services for connected homes, factories and businesses. Life, health and accident insurers are leveraging wearables and telehealth to drive meaningful customer engagement and potentially significant new revenues.
Digital Communications and Customer Experience
A new universe of digital messaging platforms, chatbots, business texting, voice assistants, and more has emerged and is in widespread and general use in commerce today, and the insurance industry has taken notice and is quickly playing catch up. During a recent virtual insurance industry event, a SMA (Strategy Meets Action) survey of participating insures asking about their interest in and objectives for digital communications and revealed that 83% consider it a vital part of the overall digital transformation strategy and 75% expect digital communications will help to improve the customer experience (CX.) And who among us are not routinely conducting business through videocast – the ultimate digital/human interface.
Accenture says that “CX is the new battleground for brands”. 72% of businesses say improving customer experience is their top priority, according to Forrester. And no wonder – Forrester found that each single point increase in CX can translate into tens of millions to hundreds of millions in annual revenue.
In its “Digital Transformation: Powering the Great Reset” of July 2020 the World Economic Forum (WEF) states that as the world moves even more online due to the coronavirus pandemic – which has driven a 50%-70% increase in global internet usage – the ability to serve customers on the digital channels they choose is no longer an option, creating what the WEF calls a “watershed moment for the digital transformation of business.”
The insurance industry has been a laggard in digital transformation, yet a new class of venture backed insurtechs has disrupted and refocused incumbents and exploited their weaknesses by leveraging new digital technologies.
Specific legacy vulnerabilities and areas of opportunity for these well-funded startups have included new cyber risk and gig economy protection products, underwriting, administration and claims management.
Applying many types of Artificial Intelligence (AI) including Machine Learning (ML), Natural Language Processing (NLP) and imaging technology to fraud prevention addresses one of the industry’s most enduring pain points.
Another intensely painful area is the claims process which has long been a protracted, labor intense, inefficient and costly process and has negatively impacted customer satisfaction, loyalty and retention. New technology offerings have come to market that streamline and compress the end-to-end claims process using AI and digital imaging to augment damage appraisals, track and report repair status, automate disbursements to policyholders and vendors and better engage with policyholders.
Insurance claim payments have always been slow and complicated, involving multiple parties such as other insurers, attorneys, healthcare providers, auto and property repairers and contractors. New digital claims payments systems have come to market to solve those challenges and the rush to touchless and virtual claims processes, boosted by pandemic-driven consumer preferences for safer contactless transactions, is surging adoption of these systems.
None of these advances would have been possible with digitization. The future of insurance is starting to come into focus and it is filled with exciting new digitally enabled opportunities for everyone involved.
Stephen Applebaum, managing partner, Insurance Solutions Group, is a subject matter expert and thought leader providing consulting, advisory, research and strategic M&A services to participants across the entire North American property/casualty insurance ecosystem.
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